Tenant reaction patterns to the threat of a terrorist attack after September 11, 2001, in downtown Chicago office market

The events of September 11, 2001 (9/11) spread the fear of other terrorist attacks targeting downtown office buildings across other major U.S. cities. Among them, Chicago owners and tenants were even more concerned because of the concentration of corporate headquarters and the site of the tallest office building in the U.S. This paper studies the tenant reactions in response to the 9/11 attacks in three locations within the Chicago’s downtown office market, comparing the before and after 9/11 office market conditions and tenant distributions. These three locations were determined based on a specific (anchor) building with financial significance and its immediate surrounding area. The anchor buildings selected ranked as first (Sears Tower), third (Aon Center) and fourth (John Hancock Center) highest building in the U.S.; and although security measures were immediately heightened after the terrorist attacks some tenants decided to vacate their office space considering the risk involved. The results of this study indicate that the 9/11 attacks had and continue to have a significant impact on vacancy and sublease vacancy rates on all three areas studied. Although the gross rent levels were almost kept stable until today, in an effort to increase demand and lower vacancy, the three areas are still suffering. In addition, new office supply seems to hurt the old office stock, due to the lack of incentives. In general, we can conclude that the psychological and economic effect of terrorist attacks on tenants of high-rise office buildings and their immediate areas is significant.